Goodman's Swing Count System

Every discipline that has ever existed in the history of civilization has had those people that have really defined that discipline and set a perfect example as to how it truly functions. When you are talking about chemistry, the natural person that defined chemistry as a discipline was Mendeleyev and his coning of the periodic table, when you are talking about physics, it is Sir Isaac Newton and his laws of motion and theory of universal gravitation. In biology, it is Charles Darwin and the theory of evolution and there are heroes, or masters, in every discipline in the world... and trading is no exception to that rule.

So who is the hero in terms of trading? Well, there are a number of answers to that question but the one that automatically springs to mind most often is the famous Charles Goodman. Charles Goodman was a trader that leaned more towards psychology and money management than he did to formalized systems to be used, and in this sense one could say that he felt the trading as much as anybody else. Whatever the case may be, he was certainly a giant in the field of trading and he destroyed almost any trading venue he came across. His system is an amalgamation of everything put together in his notes over the period of his life, where he was a giant in the trading industry.

Goodman’s Swing Count System - conservative trader?

The idea behind the swing count system is that it allows you to be a very conservative trader and therefore it allows you to only make the highest probability trades that have the lowest chance of failing on you. Goodman’s motto of sorts was that it was better to avoid losing a trade than to find a way of winning one, and therefore he was very conservative in the way he traded. Trading momentum from trade to trade was very important to him and while he might only execute one or two trades a month, they always brought him a great deal of money. This system in many ways is an everlasting tribute to the genius of Charles Goodman that has stood the test of time. The 50% Retracing Rule

The main point of the Goodman system is that at its very heart it defines a rule that is well known to a number of different people, and perhaps to you as well if you have been reading Forex related literature for a while. The rule is known as the 50% retracing rule and simply states that if you take a trend line in one direction, when the reversal takes place, you would expect the equilibrium point between sellers and buyers to be in the 50% range with respect to the length of the initial plunge. The rule then goes on to further state that the resulting resurgence in the initial direction will have a length that is roughly equal to the length of the initial trend surge.

Applying the Knowledge of Goodman’s Swing Count System

There are a number of different systems that come from this one rule and the whole point of the Goodman system is to search out and discover new variations on the general pattern of the 50% retracing rule. Specific patterns require specific articles to deal with them, but any variation that holds the 50% rule at its heart should be possible under the Goodman system.